A New Era in American Healthcare:Realizing the Potential of Reform

Karen DavisPresident

The Commonwealth Fundwww.commonwealthfund.org

kd@cmwf.org

University of OklahomaHealthcare Reform Symposium

February 24, 2011

2

What Are the Problems?

Uninsured Rates

Quality of Care Chasm

Costs of Care

Administrative Complexity

3Uninsured Projected to Rise to 61 Million by 2020 Without Reform,

Not Counting Underinsured or Part-Year Uninsured

3844

5156

61

0

25

50

75

2000 2005 2009 2015 2020

Number of uninsured, in millions

Data: U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplement, 2010;Projections to 2020 based on estimates by The Lewin Group.

Projected Lewin estimates

4

Access: How Does Oklahoma Compare?

Source: S. K. H. How, A.K. Fryer, D. McCarthy, C. Schoen, and E. L. Schor, Securing a Healthy Future: The Commonwealth Fund State Scorecard on Child Health System Performance, 2011, (New York: The Commonwealth Fund, Feb. 2011).

Percent of children ages 0-18 insured, 2008-09 Percent of parents ages 19-64 insured, 2008-090

102030405060708090

100 97 9696 939184

90

78

Best State Top 5 States Avg All States Median OK

Rank = 34 Rank = 41

5

2005 2007

In the past 12 months:

Had problems paying or unable to pay medical bills

23%39 million

27%48 million

Contacted by collection agency forunpaid medical bills

13%22 million

16%28 million

Had to change way of life to pay bills 14%24 million

18%32 million

Any of the above bill problems 28%48 million

33%59 million

Medical bills being paid off over time 21%37 million

28%49 million

Any bill problems or medical debt 34%58 million

41%72 million

Source: M. M. Doty, S. R. Collins, S. D. Rustgi, and J. L. Kriss, Seeing Red: The Growing Burden of Medical Bills and Debt Faced by U.S. Families (New York: The Commonwealth Fund, Aug. 2008).

Percent of adults ages 19–64

Seventy-Two Million Americans Have Problems with Medical Bills or Accrued Medical Debt, 2007

6Premiums for Family Coverage, 2003, 2009, 2015, and 2020

2003 2009 2015 2020$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

7,866

10,969

15,077

19,654

8,739

11,417

15,693

20,457

9,249

13,027

17,906

23,342

10,748

14,723

20,237

26,380

Lowest state Oklahoma U.S. average Highest state

Health insurance premiums for family coverage

Data sources: Medical Expenditure Panel Survey–Insurance Component (premiums for 2003 and 2009); Premium estimates for 2015 and 2020 using 2003-09 historic average national growth rate.Source: C. Schoen, K. Stremikis, S. K. H. How, and S. R. Collins, State Trends in Premiums and Deductibles, 2003–2009: How Building on the Affordable Care Act Will Help Stem the Tide of Rising Costs and Eroding Benefits , (New York: The Commonwealth Fund, December 2010).

7Prevention and Treatment:

How Does Oklahoma Compare?

Percent of adults age 50 and older receiving recommended screening and preventive care

Percent of children with both a medical and dental preventive care visit in past year

0102030405060708090

100

53

85

51

83

42

71

35

68

Best State Top 5 States Avg All States Median OK

Rank = 51 Rank = 37

Source: D. McCarthy, S. K. H. How, C. Schoen, J. C. Cantor, D. Belloff, Aiming Higher Results from a State Scorecard on Health System Performance, 2009, (New York: The Commonwealth Fund, October 2009).

8

Potentially Preventable Hospital Admissions:How Does Oklahoma Compare?

Medicare: readmitted to hospital within 30 days

Nursing home: discharge to NH & readmitted in 30 days

Home health patients admitted to hospital

0

25

50

13 13

21

14 15

2218

21

29

2125

39

Best State Top 5 States Avg All States Median OK

Percent

Source: D. McCarthy, S. K. H. How, C. Schoen, J. C. Cantor, D. Belloff, Aiming Higher Results from a State Scorecard on Health System Performance, 2009, (New York: The Commonwealth Fund, October 2009).

Rank = 46 Rank = 45 Rank = 48

9

Medicare Spending Varies Dramatically

Source: E. Fisher, D. Goodman, J. Skinner, and K. Bronner, Health Care Spending, Quality, and Outcomes, (Hanover: The Dartmouth Institute for Health Policy and Clinical Practice, Feb. 2009).

Total Rates of Reimbursement for Noncapitated Medicare per Enrollee

10

SAFETY: Variations in Use of High Risk Drugs and Potentially Harmful Drug-Disease in Medicare 2007

Source: Zhang Y, Baicker K, Newhouse J. Geographic Variation in the Quality of Prescribing. N Engl J Med 2010; 363:1985-1988.

High-risk range11.4 to 44%

Harmful Drug-Disease Range9.5 to 30.6%

11Healthy Lives and Outcomes:

How Does Oklahoma Compare?

Mortality amenable to health care, deaths per 100,000

Child mortality, deaths per 100,000 children ages 1-14

0

20

40

60

80

100

120

64

9

68

11

90

20

115

29

Best State Top 5 States Avg All States Median OK

Rank = 44 Rank = 47

Source: D. McCarthy, S. K. H. How, C. Schoen, J. C. Cantor, D. Belloff, Aiming Higher Results from a State Scorecard on Health System Performance, 2009, (New York: The Commonwealth Fund, October 2009); S. K. H. How, A.K. Fryer, D. McCarthy, C. Schoen, and E. L. Schor, Securing a Healthy Future: The Commonwealth Fund State Scorecard on Child Health System Performance, 2011, (New York: The Commonwealth Fund, Feb. 2011)..

12

Aiming Higher -- Oklahoma• Overall Rank: 50

– Access: 47– Prevention and Treatment: 48– Avoidable Hospital Use and

Costs: 44– Equity: 49– Health Lives: 44

• Potential Gains (match best performing state rates)– 315,072 additional adults

would be insured– 122,351 additional children

with a medical home– $59 million saved from

reducing Medicare readmissions

Source: D. McCarthy, S. K. H. How, C. Schoen, J. C. Cantor, D. Belloff, Aiming Higher Results from a State Scorecard on Health System Performance, 2009, (New York: The Commonwealth Fund, October 2009).

13

A New Era in American Healthcare:Realizing the Potential of Reform

• Health reform has the potential to help usher in a new era in American health care• Requires new strategies for health care organizations to succeed• Old Paradigm:

– Fee-for-service rewards volume of services, high occupancy, hospital admissions, specialized services; undervalues primary care

– Siloed provision of services; hospitals and physicians independent– Financial solvency requires limiting provision of uninsured services and

patients• New Paradigm:

– Emphasis on primary care; patient-centered medical homes– Value-based purchasing and bundled payment reward quality, reduced

hospitalization and readmissions, and evidence-based care– Accountability for patient outcomes requires coordination of care across

settings and providers; hospitals and physicians interdependent– Reaching out and serving low-income and uninsured communities is the new

market growth area

14

Four Health Reform “Game Changers”• Affordability provisions

– Income-related assistance with premiums and medical bills; essential benefits; Medicaid expansion

• New federal insurance market rules– Restrictions on underwriting, minimum medical loss ratio requirements, review of

premium rate increases, and important consumer protections• New health insurance exchanges

– Lower administrative costs and more choice of affordable health plans for eligible individuals and small businesses

• Provider payment and delivery system reforms– Patient centered medical homes– Bundled acute and post-acute care payment– Accountable Care Organizations– CMS Innovation Center and Independent Payment Advisory Board

Source: K. Davis, A New Era in American Healthcare, (New York: The Commonwealth Fund, June 2010).

15

WA

ORID

MT ND

WY

NV

CAUT

AZ NM

KS

NE

MN

MO

WI

TX

IA

ILIN

AR

LA

AL

SCTN

NCKY

FL

VA

OH

MI

WV

PA

NY

AK

MD

MEVTNH

MARI

CT

DE

DC

HI

CO

GAMS

OK

NJ

SD

WA

ORID

MT ND

WY

NV

CAUT

AZ NM

KS

NE

MN

MO

WI

TX

IA

ILIN

AR

LA

AL

SCTN

NCKY

FL

VA

OH

MI

WV

PA

NY

AK

ME

DE

DC

HI

CO

GAMS

OK

NJ

SD

19%–22.9%14%–18.9%

23% or more

2008-2009

MARI

CT

VTNH

MD

7.1%–13.9%

7% or less

2019 (estimated)

Major Reduction in UninsuredPercent of Adults 19–64 Uninsured by State

Data: U.S. Census Bureau, 2009–10 Current Population Survey ASEC Supplement; estimates for 2019 by Jonathan Gruber and Ian Perry of MIT using the Gruber Microsimulation Model for The Commonwealth Fund. SOURCE: Commonwealth Fund State Scorecard on Child Health System Performance, 2010

16

10 M (4%)Nongroup

Major Growth in Medicaid and Coverage of Small Businesses and Individuals Through Health Insurance Exchanges -- 32 Million Uninsured

Covered, 2019

* Employees whose employers provide coverage through the exchange are shown as covered by their employers (5 million), thus about 29 million people would be enrolled through plans in the exchange. Note: ESI is Employer-Sponsored Insurance. Source: S. R. Collins, K. Davis, J. L. Nicholson, S. D. Rustgi, and R. Nuzum, The Health Insurance Provisions of the Affordable Care Act: Implications for Coverage, Affordability, and Costs, (New York: The Commonwealth Fund, forthcoming).

Among 282 million people under age 65

Pre-Reform

162 M(57%)ESI

35 M(12%)

Medicaid

54 M(19%)

Uninsured16 M (6%)Other

15 M (5%)Nongroup

159 M(56%)ESI

51 M(18%)

Medicaid

24 M (9%)Exchanges

(Private Plans)

16 M (6%)Other

23 M (8%)Uninsured

Affordable Care Act

17

Total National Health Expenditures (NHE),2009–2019, Before and After Reform

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

$4.5

$5.0

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Before Reform*

After Reform

NHE in trillions

Notes: * Estimate of pre-reform national health spending when corrected to reflect underutilization of services by previously uninsured. Source: D. M. Cutler, K. Davis, and K. Stremikis, The Impact of Health Reform on Health System Spending, (Washington and New York: Center for American Progress and The Commonwealth Fund, May 2010).

$2.5

$4.3

5.7% annual growth

6.3% annual growth $4.6

18

$13,305

$21,458$19,490

$0

$5,000

$10,000

$15,000

$20,000

$25,000

2010 Baseline 2019 Baseline After Reform

Source: D. M. Cutler, K. Davis, and K. Stremikis, The Impact of Health Reform on Health System Spending, (Washington and New York: Center for American Progress and The Commonwealth Fund, May 2010).

Estimated Annual Premiums Before and After Reform, 2019

9.2%

19

Affordable Care Act: Delivery System ChangeTriple Aim of Better Population Health, Better

Care Experiences and Slower Cost Growth

THE COMMONWEALTH

FUND

20

2010 2011 2013 2014 2015-2017

Timeline for Coverage Provisions• Small business

tax credit• Prohibitions

against lifetime benefit caps & rescissions

• Phased-in ban on annual limits

• Annual review of premium increases

• Public reporting by insurers on share of premiums spent on non-medical costs

• Preventive services coverage without cost-sharing

• Young adults on parents’ plans

Source: Commonwealth Fund Health Reform Resource Center: What’s In the Affordable Care Act? (Public Law 111-148 and 111-152), www.commonwealthfund.org/Health-Reform/Health-Reform-Resource.aspx

• Insurers must spend at least 85% of premiums (large group) or 80% (small group / individual) on medical costs or provide rebates to enrollees

• HHS must determine if states will have operational exchanges by 2014; if not, HHS will operate them

• State insurance exchanges

• Medicaid expansion• Small business tax

credit increases • Insurance market

reforms including no rating on health

• Essential benefit standard

• Premium and cost sharing credits for exchange plans

• Premium increases a criteria for carrier exchange participation

• Individual requirement to have insurance

• Employer shared responsibility penalties

• Penalty for individual requirement to have insurance phases in (2014-2016)

• Option for state waiver to design alternative coverage programs (2017)

• States adopt exchange legislation and begin implementing exchanges

• Phased-in ban on annual limits

21State Insurance Exchanges:

Eight Difficult Issues for HHS and States• How should the exchanges be governed? State entity or non-profit? • How should adverse selection against exchange and among plans sold in exchange be

further deterred – what are options for states and HHS?• Opening the exchanges to large employers or not? What are the key considerations for

states and how should federal government reduce risk to the exchanges from self-insured and large employers?

• How can the exchanges be made to work well for employers to encourage their participation?

• Exchanges must certify qualified plans – how should they exercise their regulatory role in this regard? Allow all plans to participate or restrict participation to high value plans? Standardize plans beyond ACA?

• Exchanges must provide information to consumers to facilitate informed choice about health plans – how should the exchanges meet this responsibility?

• How should exchanges ensure expedient and continuous enrollment of those eligible for Medicaid/CHIP and premium/cost-sharing credits?

• How might exchanges reduce their own administrative costs and those of their users, and how will they finance their activities?

Source: T. S. Jost, Health Insurance Exchanges and the Affordable Care Act: Eight Difficult Issues, (New York: The Commonwealth Fund, September 2010).

22

Timeline for Payment and System Innovation

2010 2011 2012 2013 2014 2015

Productivity Improvement

10% Medicare Primary Care

Increase

Innovation Center

Value-based Purchasing for

Hospitals

Improve Physician Feedback

Reduce Payment for Preventable

Readmissions

Medicare Shared Savings (ACOs)

Payment Bundling Pilot

IPAB Value-based Purchasing for

Physicians

All-Payer Demos and

HIZs

Medicaid Primary Care up to

Medicare Levels

Reduce Payment for Hospital

Acquired Infections

Patient Centered Outcomes Research

Community Transformation

Grants

Extend Gainsharing Demo

Source: Commonwealth Fund Health Reform Resource Center: What’s In the Affordable Care Act? (Public Law 111-148 and 111-152), www.commonwealthfund.org/Health-Reform/Health-Reform-Resource.aspx

23

Center for Medicare & Medicaid Innovation

• Beginning this year, new center in CMS to test innovative payment and service delivery models to reduce spending while preserving or enhancing quality of care

• Expanded authority to innovate and spread• Selection based on evidence of population health focus

– Emphasis on care coordination, patient-centeredness

• Could increase spending initially– Over time must improve quality without higher costs, reduce spending

without reducing quality, or both

• Secretary can expand duration and scope

24

Accountable Care Organizations

“A group of health care providers who give coordinated care, chronic disease management, and thereby improve the quality of care patients get. The organization's payment is tied to achieving health care quality goals and outcomes that result in cost savings.”

Source: http://www.healthcare.gov; S. Kravet, “Preparing an Academic Medical Center for Health Care Reform,” 2010 Ohio State University Health Services Management and Policy Management Institute, Columbus, OH: October 2010.

25

ACO Requirements

Source: S. Kravet, “Preparing an Academic Medical Center for Health Care Reform,” 2010 Ohio State University Health Services Management and Policy Management Institute, Columbus, OH: October 2010.

26

Promising ACO Models of Payment and Care Delivery

Continuum of Organization

Risk-adjusted global fee with risk mitigation (e.g., reinusrance)

Global amb-ulatory care fees & bundled acute case rates

Global primary care fees & bundled acute case rates

Global primary care fees

Blended FFS and medical home fees

Con

tinuu

m o

f Pay

men

t B

undl

ing

Patient-centered medical home networks

Multi-specialty physician group practices

Integrated ambulatory and inpatient systems

Continuum

of Quality

Bonuses and Shared

Savings

Quality bonuses for patient outcomes; large % of shared savings, some shared risk

Quality bonuses for preventive care; management of chronic conditions; small % of shared savings

Quality bonuses of care co-ordination and intermediate outcome measures; moderate % of shared savings

Less Feasible

More Feasible

Source: A. Shih, K. Davis, S. Schoenbaum, A. Gauthier, R. Nuzum, and D. McCarthy, Organizing the U.S. Health Care Delivery System for High Performance, (New York: The Commonwealth Fund, August 2008).

27

A New Era in Health Care Delivery: How Oklahoma Can Realize the Potential

• Realizing the potential of health reform will require skillful implementation by states

• Oklahoma can lead on primary care focus– Oklahoma one of first states with primary care extension

service– Adoption of Access model of patient-centered medical homes– Community Health Teams to support patient-centered medical

homes (Sec. 3502)– Invest in maternal and child health

• Oklahoma can also lead on chronic care and care coordination of frail elders and disabled– Improve transitions in care and reduce hospital readmissions– CMS Innovation Center pilots for dual Medicare and Medicaid

eligible population– Community-Based Care Transitions Program (Sec. 3026)

28

Realizing Health Reform's Potential: A New Series of Briefs on the Affordable Care Act

29

Thank You!

Kristof Stremikis, Senior Research Associate, ks@cmwf.org

For more information, please visit:www.commonwealthfund.org

Rachel Nuzum,Senior Policy Directorrn@cmwf.org

Sara Collins,Vice President, src@cmwf.org

Cathy Schoen, Senior Vice President for Research and Evaluation, cs@cmwf.org

Melinda Abrams,Vice President, mka@cmwf.org

Tony Shih,Executive Vice President for Programs, ts@cmwf.org